Commodity Prices Continue to Climb

Corn and other commodity prices are climbing this year, a situation propelled by demand from China, speculation on Wall Street, and adverse weather affecting crops.

Commodity Prices – Supply and Demand

The first is a fluctuation in China’s demand for feed products. China’s corn prices surged recently in response to a drop in both output and state stockpiles. Concerns about invasive pests and predictions of shortfalls in corn crops has led China to convert grain corn farmland into feed crops, including forage grain. In addition to a slump in supply, China is also seeing a rise in demand. 2019 and 2020 poultry feed consumption hit historically high levels and is expected to continue through 2021. As a result, the country is compensating for these demands and deficits by importing more corn.

In fact, China is expected to import about four times what it normally imports in corn, much of that from US farmers. This demand has corn prices soaring and cheaper alternatives, like wheat, are being sought to mitigate the costs for feed. Rising corn prices and the shift to alternative feed products are adding to the ever-changing demand in Chinese commodity imports.

Wall Street Speculates on Prices

On Wall Street, speculators have been allowed to make larger bets on agricultural commodities and the threshold for daily price swings has been widened by 60%. This adds more fuel to the pricing fire.

Drought and other Crop Concerns

In the US, the Corn Belt was off to a great start with a good planting season and favorable conditions for the start of the growing season. However, toward the end of April, drier conditions set in. May was cool throughout most of the eastern Corn Belt, where warmer weather would have been more welcome. June weather conditions are calling for cold fronts across the Midwest with rain in the eastern Corn Belt and southeastern states. Extended forecasts are calling for hot and dry weather for the months of July and August, crucial growth stages for agricultural crops.  It is expected that a heat ridge will build up along the Rockies, pushing hot and dry air into the Delta, Plains, and western Corn Belt. Drought is a big concern in certain areas of the US.

Brazil, the other top producer of corn, is also struggling with hot, dry weather conditions. The planting of their second (and main) crop of corn was delayed because rainy weather delayed the soybean harvest and now faces dry heat conditions.  As a result, the forecasted production is now 60 million metric tons, down from April’s estimate of 73 million metric tons.

The spotty weather conditions are contributing to a commodities storm of its own. International demand, domestic demand, and supply challenges with two of the world’s top producers are all leading up to commodity price inflation.

We are here to help. Our talented staff will help you source the right commodities at the best price available. Proteins, dairy, grains, and more. We work hard to make your food business successful!